Asking for a quick HOW-TO for creating alternative letters when placed next to eachother.

This free font also has some neat characters that use the .. process? option? technique? thingy: http://www.dafont.com/woodstamp.font (you can't test or see the characters I'm referring to in the preview, example: lowercase "er")

Every letter is able to connect to every other letter seamlessly (so it looks custom made) but I have yet to figure out how to do this and I don't know if the option has a specific name to even begin searching how to get started.

I use Highlogic's Font Creator mainly, and have an old version of Font Lab.. I am tired of having to use the same letters especially when placed next to eachother - when the font has textures and designs it can get pretty ugly/repetitive.

Woodstamp.otf has a lot of ligatures like that 'er'. In Font Creator you can of course make those sort of ligatures too but you need some external (free) programs to make it an otf font so that these ligatures will be recognized.
Read this. Take your time